Enabling Policy Environments for Climate Finance: Scaling-up national systems to meet the climate finance gap 1
2013 LTF Workplan, Pillar II: Enabling policy environments for climate finance In Bonn, Amal-Lee Amin of E3G proposed the following questions to help define LTF workplan for 2013: What can we learn from existing uses of climate finance? How to choose the appropriate policies & instruments for each context? How to identify between challenges in planning, accessing, implementing & monitoring? How to focus attention on enabling environments for attracting adaptation finance? Can tracking of climate finance be part of an effective enabling environment for climate finance? 2
If you don t count it, it doesn t matter. Ancient Budget Professors Proverb 3
Climate Public Expenditure & Institutional Review (CPEIR) Objective: To review allocation, management & results of public expenditures related to climate 1. REVIEW POLICY change Policy making process Key-question: How is climate change reflected in 2. SET POLICY AND 6. EVALUATE AND AUDIT UNDERTAKE PLANNING national policies, institutions & public expenditures? Implementation: Led by government through cross 5. MONITOR activities and government steering group chaired by 3. Ministry MOBILIZE AND ACCOUNT for expenditure of ALLOCATE RESOURCES Finance or Planning CPEIRs build on WB methodology for ACTIVITIES PER/PEIR/PEER Budgetary process 4. IMPLEMENT PLANNED ACTIVITY Add climate-relevance dimensions to analysis 4
CPEIRs: Towards a climate fiscal framework 1. Policy development: How is CC policy formulated & linked to expenditure through Link national CC strategies? priorities with expenditure & taxation decisions through the national budget process 2. Institutional structures: What are roles & responsibilities of institutions involved Ensure in managing external CC response finances are & their used interaction? effectively alongside domestic resources 3. Public financial management: How to quantify & Provide track CC-related a framework expenditures to incentivize the private budget? investments 5
Policy, institutional & expenditure recommendations from CPEIRs Link national budget & climate policy Coordination by finance & planning ministries critical Local government a key channel for climate finance Harmonised definition of a climate expenditure The national budget is key to address climate change Relevance of sectors is country specific but local government, transport & water significant Too much int l focus on extra-budgetary climate funds Dirty expenditures should also be identified & reviewed 6
Expenditures & sources Climate relevant expenditures as a proportion of total expenditure & GDP 7
Few major players with local channels key Highest climate relevant spending agencies as proportion of total climate budget 8
Domestic vs. external resources Average proportion of expenditures financed by domestic & external resources over last three years 9
Development vs. recurrent expenditures Comparison of climate relevance of development vs. recurrent expenditures in Samoa 10
Foundation of a climate fiscal framework Potential contributions to emission reduction - Indonesia 11
CPEIRs: Early lessons learned CPEIRs help to set a baseline against which future expenditures can be measured NAMAs/NAPs Economics need to be much better understood Costbenefit of adaptation; cost-effectiveness Medium-term budget outlook allows for quantitative shift in expenditures over time Taxes & subsidies Quality of expenditures to be improved & monitored while maximising synergies Mainstream CC in Dev & DRR plans International finance should build on domestic finance, catalyse private finance Country leadership 12
Linking CPEIRs to NAMAs, LEDS, sectoral plans Provided that there is alignment of Boundaries Disbursement period GHG inventory period CPEIRs can be THE instrument to measure country effectiveness to implement a specific climate action Example CPEIR Indonesia / NAMA Mitigation linking: Fiscal Framework: UNDP Framework Low Emission for appraising, Capacity monitoring Building (LECB) cost-effective Programme: actions Inter-ministerial Chile & Mexico: cooperation CPEIR-like to ensure assessment necessary factoring budget, in the policies private & sector practices financial place flows Prioritization Indonesia of & policies Viet Nam: & funding LECB for Programme climate mitigation can build Alignment on the of completed budgets &/ ongoing fiscal incentives CPEIRs for leveraging private & CSO investments 13
National Climate Funds: One way to implement CPEIR findings 14
Examples of NCF Goals Collect sources of funds & direct them toward climate change activities that promote national priorities Blend finance from public, private, multilateral & bilateral sources to maximize a country s ability to advance national climate priorities Coordinate country-wide climate change activities to ensure that climate change priorities are effectively implemented Strengthen capacities for national ownership & management of climate finance, including for direct access to funds 15
Policy & other functions of a NCF Support goal setting and the development of programmatic/sectoral strategies Fundraise from multiple sources Manage domestic, bilateral & multilateral partnerships Provide project approval, QA/QC & support implementation Supply policy assurance through safeguards Provide financial controls to ensure effective MRV Manage performance measurement, including reporting on activities & resources Disbursement of funds to subnational & municipal level Support knowledge exchange & management 16
Lessons learned from existing NCFs Clearly define the functions of the fund Ensure that the objectives are well-defined & practical Have realistic expectations of capitalization Design a streamlined project cycle Undertake stakeholder engagement to identify needs and requirements Ensure unambiguous appraisal & performance criteria, including fiduciary standards Incorporate design elements that are stable but flexible to adjust over time Establish capacity development as a key element of the fund NCFs are not a panacea but can help build key capacities 17
Conclusions Both CPEIRs & NCFs perform significant policy functions for guidance on climate finance Encourage a holistic & comprehensive view of climate expenditures CPEIRs link climate to budget so climate is part of budget framework & performance measures and link budget to climate so climate strategies are prioritised & costed Introduce CC tagging to budget & performancebased budgeting Align country-specific spending on climate action at all levels of governance 18
Thank you Daniel Buckley Climate Change Policy Analyst daniel.buckley@undp.org 19
For more information CPEIRs: Methodological note & Asia-Pacific case studies: www.aideffectiveness/climatechangefinance NCFs: Blending Climate Finance Through National Climate Funds: A Guidebook for the Design and Establishment of National Funds to Achieve Climate Change Priorities NCFs in Asia Lessons Learned with case studies: www.snap-undp.org/elibrary/publication.aspx?id=702 20